Annual price increases: how to negotiate indexation clauses

An annual price increase of a few percent seems small. But over multiple years and dozens of contracts, it adds up quickly. A 5% increase per year makes a contract over five years more than 27% more expensive.

How indexation works

Software contracts usually contain one of these forms:

• A fixed percentage per year, regardless of inflation.

• An index linkage, such as the consumer price index.

• The right to adjust the list price, where the new price applies at renewal.

The last form is especially tricky because you don’t know in advance how much more expensive it will become.

What you can negotiate

A cap. Agree on a maximum for the annual increase, even if the index or list price rises more sharply.

Price protection over multiple years. Fix the price for the entire term. Note: you then also commit for longer.

A renegotiation right. If the increase exceeds the cap, you may renegotiate or terminate.

The same price on expansion. Agree that additional licenses are added under the same conditions.

The right moment

Your best chance for good agreements is with a new contract or a renewal, preferably three to six months before the end date. Mid-term is harder, but when expanding licenses you can still bring up the subject.

How SoftVaro helps

SoftVaro maps the indexation clauses in your contracts, shows what they will cost you in the coming years, and negotiates caps and price protection on your behalf, supported by benchmark data from comparable Enterprise trajectories.